Alrosa to reallocate product mix, roles among cutting units with Kristall integration
MOSCOW. Dec 17 (Interfax) - The supervisory board of Alrosa approved a strategy for the development of its cutting and polishing division for 2020-2022, as well as a plan for the integration of the Smolensk diamond factory Kristall at a meeting on December 13, the Russian diamond miner reported.
Alrosa Group has several cutting units, including Diamonds of Alrosa branches in Moscow and Barnaul, and Kristall in Smolensk, which it bought from the state in October. Together they account for more than 60% of all Russian diamond cutting.
The company plans to redistribute the mix of rough diamonds for cutting in order to maximize production efficiency. Fancy colored and large colorless diamonds will be cut in Moscow by highly-skilled operational staff, Alrosa said in a press release.
In the early stages of the integration, cutting of colorless diamonds weighing 1 to 10 carats will be moved to Smolensk in order to reduce costs. Small-size diamonds will be cut in Barnaul and Smolensk, with an allocation based on the actual efficiency of producing one or another position, Alrosa said.
The total cutting volume will exceed 200,000 carats of rough diamonds, the company said.
Alrosa plans to centralize rough diamonds allocation and polished sales in order to reduce administrative and commercial costs. Pulling together diamonds that currently go to Kristall and Diamonds of Alrosa will make it possible to form a more representative and stable rough diamond mix, resulting in synergy, the company said.
Diamonds of Alrosa will sell polished products. Alrosa plans to create a consolidated sales service for polished diamonds based at this branch, and some of the employees of Kristall's sales divisions will move to the new sales division.
Alrosa said it expects the implementation of the strategy to help improve the operational efficiency of the group's consolidated diamond cutting division, which will have a positive impact on the financial results of this business segment.
Diamonds of Alrosa "achieved a positive financial result for the first time in three years" in 2019, largely due to the implementation of an earlier strategy for the development of the group's cutting division, Alrosa CEO Sergei Ivanov was quoted as saying.
"We aim to improve the quality of interaction with customers, develop new sales channels, implement joint marketing programs with jewellery manufacturers, and introduce more automation and modern technologies. In our opinion, the merger of diamond cutting platforms will make it possible to reduce production costs and get a stable market share for polished diamonds with Russian origin marked by a high quality of cutting," Ivanov said.
Cut diamonds currently generate no more than 2% of Alrosa's revenue, but their share will increase with the integration of Kristall.